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781. The Dollar and Its Discontents

Author:
Olivier Jeanne
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Has the US dollar delivered the benefit that the rest of the world is expecting from its holdings of international liquidity? US government debt has been liquid and safe, and it is supplied in sufficient quantity. But it has given a low return to the countries that accumulated the most reserves, especially when those returns are measured in terms of the countries' own consumption. Jeanne argues that countries that accumulate the most reserves should expect a low return in terms of their own consumption and that international monetary reform can do little to change that fact.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

782. The Microeconomics of North–South Korean Cross-Border Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Economic integration between North and South Korea occurs through three modalities: traditional arm's-length trade and investment, processing on commission (POC) trade, and operations within the Kaesong Industrial Complex (KIC). In order, these three modalities are characterized by decreasing exposure of South Korean firms to North Korean policy and infrastructure. Through a survey of 200 South Korean firms operating in North Korea, the authors find that these modalities of exchange matter greatly in terms of implied risk. For example, firms operating in the KIC are able to transact on significantly looser financial terms than those outside it. The authors find that direct and indirect South Korean public policy interventions influence these different modalities of exchange and thus impact entry, profitability, and sustainability of South Korean business activities in the North. In effect, the South Korean government has substituted relatively strong South Korean institutions for the relatively weak Northern ones in the KIC, thus socializing risk. As a result, the level and type of cross-border integration observed in the survey is very much a product of South Korean public policy.
Topic:
Conflict Resolution, Economics, International Trade and Finance, and Infrastructure
Political Geography:
South Korea and North Korea

783. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Topic:
Foreign Policy, Economics, International Trade and Finance, and Bilateral Relations
Political Geography:
China, Israel, and North Korea

784. Lessons from Reforms in Central and Eastern Europe in the Wake of the Global Financial Crisis

Author:
Anders Åslund
Publication Date:
04-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The response of the ten new eastern members of the European Union to the global financial crisis has valuable lessons of crisis resolution for the euro area. These countries were severely hit by the crisis in the fall of 2008 and responded with extensive reforms. Crisis made the unthinkable possible. This paper outlines the main reform measures that the ten Central and East European (CEE) countries carried out. It then quantifies to what extent the CEE countries resolved the macroeconomic crisis and explores the effects of the reforms on future growth prospects. The fourth and major section discusses how the political economy of the crisis resolution actually worked. Finally, the author examines what lessons euro area countries can learn from the crisis resolution of the newest members of the European Union.
Topic:
Debt, Economics, International Trade and Finance, Markets, Political Economy, and Financial Crisis
Political Geography:
Europe

785. Inward foreign direct investment: Does it enable or constrain domestic technology entrepreneurship?

Author:
Saurav Pathak, André Laplume, and Emanuel Xavier-Oliveira
Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
Whether or not foreign direct investment (FDI) is essential for domestic technological and economic development remains a contentious question. The controversy is illustrated by comparing the Celtic and Asian Tigers experiences from 1995 to 2000. Based on IMF and World Bank data in constant prices, Ireland and China averaged an annual growth rate of 8% in GDP per capita. However, FDI per capita grew at an average pace of 98% per year in Ireland, while in China it decreased by 1% -- absolute values averaged US$ 3,397 versus US$ 144, respectively. This suggests that, rather than a one-policy-fits-all approach, customized policies are more appropriate; and, if any generalization can be made, it should be based on a country's stage of economic development.
Topic:
Development, Economics, Emerging Markets, International Trade and Finance, and Foreign Direct Investment
Political Geography:
Israel and Asia

786. Untying the land knot: Turning investment challenges into opportunities for all citizens

Author:
Xiaofang Shen
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Columbia Center on Sustainable Investment
Abstract:
China, 1980s. Newly embarked on its economic transformation, China opened to foreign direct investment (FDI) to obtain capital, technology and access to world markets. Investors hesitated, however, since national law prohibited access to state-owned land. In reaction, the government introduced a long-term lease system, first tested in special economic zones and later applied across the country. This approach enabled China's phenomenal success in attracting FDI in the years to come; it also paved the way for 500 million urban citizens to gain property rights, which in turn inspired the rural population to ask for the same rights today.
Topic:
Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:
China

787. Evaluate Sustainable FDI to Promote Sustainable Development

Author:
John M. Kline
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
Prescriptions to increase the role of FDI in promoting sustainable development generally focus on the macro level -- getting policies right and otherwise improving the investment climate. These steps are necessary but not sufficient. Effective implementation processes, especially at the micro project level, are also essential to encourage FDI that matches host country development needs and priorities.
Topic:
Development, Economics, Emerging Markets, International Trade and Finance, and Foreign Direct Investment

788. Building on Complimentary Assets in a Unified TCP/IP World

Author:
Martin Kenney and Timo Seppälä
Publication Date:
12-2012
Content Type:
Working Paper
Institution:
Berkeley Roundtable on the International Economy
Abstract:
The contemporary competition in the smartphone industry is an ideal setting for studying Schumpeterian creative destruction, the role of the complementary assets, and the strategic use of technology platforms. This current creative destruction is particularly interesting because the current convergence from previously separate industries is pitting firms with differing business models from the old telecommunications world against the operating system winners of the old personal computer, and competitors from the new internet world. This paper utilizes insights from the literature on complementary assets and technology platforms to understand the completion in smartphones. This paper contributes a broadened understanding of the contemporary industry convergence occurring with Internet and cloud computing at its unifying center, and with intelligent communications devices at its edges. Furthermore, this paper extends the current academic discussion of the changes in the mobile telecommunications industry to consider the possibility that cloud computing will integrate a plethora of new devices that will include personal computers, smartphones, the internet-enabled television, and a nearly infinite number of other devices that will provide data to the cloud.
Topic:
Economics, Globalization, Industrial Policy, International Trade and Finance, Markets, and Science and Technology

789. Financial markets in GCC countries: recent crises and structural weaknesses

Author:
Steffen Hertog
Publication Date:
12-2012
Content Type:
Policy Brief
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
Gulf Co-operation Council (GCC) countries' financial sectors are solid, but not very sophisticated: business is mostly financed through bank lending rather than bonds or stock issues, and banks continue to rely on state support and, in many cases, are directly state owned.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Middle East and Arabia

790. China's regional security relations and interaction with the U.S.: trends, challenges and possible scenarios

Author:
Frans-Paul van der Putten
Publication Date:
12-2012
Content Type:
Working Paper
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
This paper provides a brief overview of current developments relevant to Sino-U.S. security relations, and to China's involvement in regional security issues, in East and South-East Asia. The most fundamental challenge with regard to regional stability is how the roles of China and the United States in the Asia Pacific can be reconciled. While the U.S. is concerned that a rising China will eventually push American influence out of East and South-East Asia, China in turn fears that the U.S. will try to retain its leadership role by exploiting and amplifying tensions between the Chinese and their neighbours. Currently the Sino-U.S. rivalry is threatening unity within ASEAN, which poses an immediate risk for regional stability. A substantial improvement in regional stability – whether in South-East or in East Asia – is unlikely unless the U.S. and China manage to stabilise their bilateral relationship. It is important for all interested parties, inside Asia but also outside (including in Europe), to contribute to a move away from a scenario in which regional stability continues to deteriorate, and in the direction of a scenario that involves a cooperative arrangement between China and the U.S. in a stable multilateral setting.
Topic:
Foreign Policy, Arms Control and Proliferation, International Trade and Finance, Bilateral Relations, and Hegemony
Political Geography:
United States, China, Israel, East Asia, Australia/Pacific, and Southeast Asia